Manchin’s Big Giveaway for EV Buyers in Conflict With Biden’s War on Mining

The Manchin/Schumer ”Inflation Reduction Act“ keeps and extends the $7,500 tax credit on electric vehicles and removes the numerical cap but there are a number of stipulations related to obtaining the full credit, one of which is where the battery materials are made. To qualify for $3,750 of the credit, an increasing share of a vehicle’s battery minerals such as lithium and nickel must be extracted or processed in the United States or in a country with which the United States has a free-trade agreement, starting at 40 percent in 2023 and increasing to 80 percent in 2027. The other half of the credit will only be available for vehicles in which a majority of its battery components are made in North America, starting at 50 percent in 2023 and growing to 100 percent by 2029. The credit ends on December 31, 2032.

What makes these stipulations an issue for buyers and automakers is that most of the world’s critical minerals are mined in countries such as Russia, China, Indonesia and the Democratic Republic of Congo with which the United States does not have free-trade agreements. In fact, China dominates the world battery market and the processing of the materials needed to produce the battery. About 80 percent to 90 percent of battery components are made in China, which refines 68 percent of the world’s nickel, 73 percent of cobalt, 93 percent of manganese and 100 percent of the graphite in electric vehicle batteries. China dominates mineral refining and battery component production because it invested heavily in mineral extraction over the past several decades and because it is far more lenient on regulation than the United States and Europe.

Senator Joe Manchin insisted on these requirements to ensure that a critical mineral mining industry develops in the United States. Since President Biden has been in office, a number of mining projects that have been under development for years or even decades have been turned down for permits or have had them revoked. In January, the Biden administration revoked federal leases for the Twin Metals mine in Minnesota that contains copper, nickel and cobalt. In June, the U.S. Forest Service recommended a region-wide ban on mineral mining in the Superior National Forest. In Minnesota, legal challenges and permitting issues are holding up the PolyMet copper and nickel mine, which has undergone over a decade of environmental review. Environmental groups have sued to block a lithium mining project in Nevada and two copper mines in Arizona (Rosemont and Resolution) are under federal environmental review and legal suits from environmentalists. Copper producers are worried about the opposition to building new mines, with major projects stuck in limbo from the United States to Peru. California recently imposed a tax on in-state lithium production, which could make projects unprofitable.

Regulators suspended a right-of-way for a road in Alaska, which provided access to one of the world’s largest mineral deposits including zinc and copper. On March 11, the Bureau of Land Management notified the Alaska Industrial Development and Export Authority that it suspended a previously issued 50-year right-of-way that covers 25 miles of a proposed 211-mile road connecting the Ambler Mining District to Alaska’s highway system. Biden’s Department of Interior determined that the effects the proposed Ambler Road might have on subsistence uses were not properly evaluated and that tribes were not adequately consulted prior to issuing the right-of-way, despite seven years of such evaluations and consultations. Further, BLM’s right-of-way suspension notice did not identify any specific deficiencies or corrective action plan, which leaves the development authority at a federal roadblock without any indications of what needs to be done or how long it will take to gain access to the Ambler Mining District.

Other Electric Vehicle Tax Credit Stipulations

The bill would change the credit from an electric vehicle credit to a “clean” vehicle credit, allowing fuel cell vehicles to qualify. To qualify for the credit, the vehicle must undergo final assembly in North America (i.e., United States, Mexico or Canada).

The bill removes the current cap of 200,000 electric vehicles per manufacturer that can receive the credits.  In the past, the cap had been established to ensure the commercialization of the new technology.  Now it is a direct subsidy in pursuit of Biden’s net zero carbon dioxide emission dream. Tesla and General Motors have used up their quotas, and companies such as Ford Motor and Toyota will soon lose access to the credits.

The bill imposes an income limit with phase out based on the taxpayer’s modified adjusted gross income. The phase out starts if the adjusted gross income exceeds $300,000 for a married couple filing jointly, $225,000 for a head of household, and $150,000 otherwise. The bill also establishes a price limit to qualify for vans, SUVs and pickups ($80,000) and sedans ($55,000).

The bill would also create a used electric vehicle credit through 2032, capped at the lessor of $4,000 or 30 percent of the sales price. The credit amount begins to phase out if the taxpayer’s adjusted gross income is above certain thresholds: $150,000 for married couples filing jointly, $112,500 for head of household, and $75,000 otherwise.

The bill would create a new up-to 30 percent credit (not to exceed $40,000) for the cost of commercial electric vehicles and fuel cell vehicles through 2032.

The bill also extends the 30 percent credit for charging/refueling stations through 2032. It would provide a base rate of 6 percent of expenses up to $100,000 and a bonus rate of 30 percent of expenses up to $100,000. To qualify for the bonus rate, taxpayers must meet labor requirements.

Conclusion

Electric vehicle automakers received a tax credit extension and the removal of the cap on the number of vehicles sold in the proposed bill, but the stipulations on the battery component and minerals needed may result in no tax credit at all if the Biden administration continues with the barriers to mining that it has so far instituted. The Biden administration has revoked leases and withheld permits on several critical mineral mines in the United States, many of which have spent a decade or more getting permits and holding consultations with tribes and communities. Biden’s electric vehicle goals are dependent on the tax credit, but those goals will not be met if Biden’s war on mining continues.

*This article was adapted from content originally published by the Institute for Energy Research.